I am working on two questions and I just cannot figure our how to get these answers. I am hoping someone can help me.

The first question is regarding a Make or Buy Decision. I have figured everything out except the Overhead, which of course is stopping me from figuring out the differential income (loss) for making the monitors.

The second question I am just at a loss on how to do the differential analysis report.

Question 1: Make or Buy Decision:

Zee-Drive Ltd. is a computer manufacturer. One of the items they make is monitors. Zee-Drive has the opportunity to purchase 19,000 monitors from an outside supplier for $197 per unit. One of the company's cost-accounting interns prepared the following schedule of Zee-Drive's cost to produce 19,000 monitors:

Total Cost of producing 19,000 monitors Unit Cost

Direct Material 2,185,000 115

Direct labor 1,254,000 66

Variable factory overhead 589,000 31

Fixed manufacturing overhead 532,000 28

Fixed non-manufacturing overhead 836,000 44

Totals 5,396,000 284

You are asked to look over the intern's estimate before the information is shared with members of management who will decide to continue to make the monitors or buy them. The company's controller believes that the estimate may be incorrect because it includes costs that are not relevant. If Zee-Drive buys the monitors, the direct labor force currently employed in producing the monitors will be terminated and there would be no termination costs incurred. There are no materials on hand and no commitments to suppliers to purchase materials, so all materials would need to be purchased to make the monitors. Variable overheads are avoidable if monitors are bought. Fixed manufacturing overhead costs would be reduced by $56,700, but non-manufacturing costs would remain the same if monitors are bought.

Make or Buy Decisions

Differential Analysis Report

Purchase price of 19000 monitors 3,743,000

Differential cost to make:

Direct Materials 2,185,000

Direct labor 1,254,000

Overhead ___________ _________

Differential income (loss from making monitors) _________

Question 2: Keep or Replace Machine:

Skiles Coporation is a manufacturer of classic rocking chairs. The company has been using a particular sanding and finishing machine for over 10 years and believes that it may be time to replace the machine. The company is trying to decide whether replacing the old machine is a wise economic decision. The company's controller pulled together the following information on the old machine and the new possible replacement machine.

Old Machine:

Original cost 446,400

Current accumulated depreciation 319,400

Estimated annual variable manufacturing cost

for machine 73,000

Estimated selling price of machine 169,600

Estimated remaining useful life (in years) 6

New Machine

Purchase Cost 803,100

Estimated annual variable manufacturing costs

for machine 46,650

Estimated residual value 0

Estimated useful life (in years) 6

Replace or Keep Decision

Differential Analysis Report

Cost of replacing old machine:

Annual differential decrease in cost _______

X number of years _______

Total differential decrease in cost _______

Proceeds from sale of present machine _______ ______

Cost of new machine ______

Net differential (increase)/decrease in cost, six year total ______